GLOBALIZATION

Photo by: Alex White

Globalization is the process by which the economies of countries around
the world become increasingly integrated over time. This integration
occurs as technological advances expedite the trade of goods and services,
the flow of capital, and the migration of people across international
borders. The term has been used in this context since the 1980s, when
computer technology first began making it easier and faster to conduct
business internationally. Globalization can also refer to the efforts of
businesses to expand their operations to new countries and markets.

According to a cover story in
Business Week,
globalization "has created millions of jobs from Malaysia to
Mexico and a cornucopia of affordable goods for Western consumers. It has
brought phone service to some 300 million households in developing nations
and a transfer of nearly $2 trillion from rich countries to poor through
equity, bond investments, and commercial loans. It's helped topple
dictators by making information available in once sheltered countries. And
now the Internet is poised to narrow the gulf that separates rich nations
from poor nations even further in the decade to come."

Without a doubt, globalization has had a number of positive effects on
nations and businesses around the world. Yet the concept—once
regarded as almost universally positive—has undergone a bit of a
reassessment in recent years. In fact, widespread protests against the
World Trade Organization (WTO) and consumer boycotts arising from the
practices of multinational corporations in developing countries have
raised public awareness of the hazards of globalization. "The
plain truth is that market liberalization by itself does not lift all
boats, and in some cases, it has caused severe damage to poor
nations," the
Business Week
article admitted. "What's more, there's no point
denying that multinationals have contributed to labor, environmental, and
human rights abuses as they pursue profit around the globe."

THE CONTROVERSY OVER GLOBALIZATION

Globalization gives companies access to wider markets and consumers access
to a greater variety of goods and services. But the benefits of
globalization are not always shared by all of the parties involved in
trade. Unfortunately, developing countries—which need the potential
benefits of globalization the most—are often the losers.
"The downside of global capitalism is the disruption of whole
societies, from financial meltdowns to practices by multinationals that
would never be tolerated in the West," the
Business Week
article noted. "Industrialized countries have enacted all sorts of
worker, consumer, and environmental safeguards since the turn of the
century, and civil rights have a strong tradition. But the global economy
is pretty much still in the robber-baron age."

Some people view globalization in positive terms, as a key force in
promoting worldwide economic development. But others believe that
unrestricted global trade will only serve to increase the inequality
between developed and developing countries. In reality, globalization
offers both opportunities and risks for developing countries, and there is
a great deal of variation in their experiences with it. Some regions, like
Asia, have integrated into the global economy quickly and achieved
economic growth as a result. But other regions, like Africa, have suffered
from increased political instability, poverty, and environmental
degradation since they became involved in international trade. "The
real question isn't whether free markets are good or bad,"
the
Business Week
article stated. "It is why they are producing such wildly
different results in different countries. Figuring out that answer is
essential if businesses, government leaders, and workers are all to
realize the benefits of global markets."

In the late 1990s, there was a great deal of debate about how advanced
economies and multinational corporations could help developing nations to
share in the benefits of globalization. Some experts claim that developing
nations need debt relief, an increased flow of direct financial investment
and technology, and unrestricted access to markets in advanced countries
in order to begin catching up. Others claim that these measures are
pointless unless the leaders of the developing nations show a willingness
to establish a stable government and invest in the education of their
citizens. "Before trade and foreign capital can translate into
sustainable growth, governments first must deliver political stability,
sound economic management, and educated workers," the
Business Week
article argued. Otherwise, foreign investment would likely lead to
government corruption and the exploitation of workers.

The potential problems with globalization are not limited to developing
nations, however. Some workers in advanced economies—particularly
those in unskilled jobs and belonging to labor unions—feel that
they are being increasingly displaced by low-wage competition in
developing countries. Some of these workers are unable to make the
transition to skilled jobs and service-oriented industries. Other critics
of globalization claim that integration into a global economy reduces the
sovereignty of nations, especially in regards to economic policy making.
They worry that advanced nations will face limited choices in tax and
monetary policies under the rules of world trade.

The concerns of developed and developing countries overlap to create a
complex web of problems for globalization. Some countries will inevitably
be viewed as trying to impose their values on other countries.
"Balancing growth with environmental and labor regulations is
wrenchingly complex in countries where people live on the margin,"
according to
Business Week.
"Many poor nations fiercely resist discussion of labor or
environmental issues in the WTO because they feel the process will be
hijacked by Western protectionists. The feeling is that Western unions
will shield jobs at home by imposing standards that drive up labor costs
in emerging markets to levels where developing nations can't
compete."

THE ROLE OF THE WTO

In the late 1990s, much of the controversy over globalization focused on
the World Trade Organization (WTO). The WTO was established in 1995 to
facilitate world trade and resolve disputes between nations. Headquartered
in Geneva, Switzerland, the WTO had 134 member nations in 1999,
three-quarters of which were developing nations. According to Simon J.
Evenett in an article for
Finance and Development,
the WTO "serves the developing countries' interests by
facilitating trade reform, providing a mechanism for settling disputes,
strengthening the credibility of trade reforms, and promoting transparent
trade regimes that lower transaction costs."

Shortly after it was established, the WTO became a lightning rod for
controversy over globalization. "Seen through one lens, the World
Trade Organization is a benevolent United Nations of trade, with just
enough enforcement powers to help nations work out their
differences," Steve Wilhelm wrote in the
Puget
Sound Business Journal.
"Seen through another lens, the WTO is a menacing,
corporate-dominated world government of trade in which the legislative
body and the courts operate outside the scrutiny of anyone who's
not a government leader or corporate lawyer. From this viewpoint, the
organization's power to adjudicate trade disputes also gives it the
power to override national laws, including environmental protections. In a
sense, it compromises the sovereignty of its member nations."

The two main issues embraced by anti-WTO activists are the rights of
laborers and protection of the environment. "As production and
consumption grow around the world, many impacts fall on the people who
supply labor to produce things, and the environment that supplies the raw
materials and absorbs the effluent," Wilhelm noted. Those who
oppose the WTO worry that global free trade will threaten hard-fought
labor and environmental victories in the United States and other developed
nations. For example, activists protested that—under WTO
rules—the United States could not prevent the import of shrimp
caught in nets that also caught an endangered species of sea turtle.

Protesters were also concerned about the loss of American jobs overseas
and the poor social and environmental records of multinational
corporations operating in developing countries. "The heady,
unrealistic days of globalization appear to be over,"
Business Week
noted. "Where once it was promised that the simple spread of
markets would melt poverty, dissolve dictatorships, and integrate diverse
cultures, today the mere mention of globalization generates anger,
discord, and accusations."

FOUR LEVELS OF GLOBALIZATION

Globalization most often refers to the increasing degree of connection
between various countries and their economies. But another definition
involves the efforts of businesses to expand their operations into foreign
markets. This definition has gained importance with the advent of the
Internet, which gives all companies the potential to achieve global reach
in their operations.

As Jennifer Derryberry wrote in
Sales and Marketing Management,
businesses generally operate at one of four basic levels of
globalization. The first level is a multidomestic company. At this level,
the business consists of several independent units that operate in
different countries, with little communication between them. The second
level, an international company, maintains a headquarters in one country
and operates branches in other countries. At this level, the company is
likely to impose its home country bias on other markets rather than making
a true effort to integrate into the global economy.

The third level of globalization, a transnational company, consists of
loosely integrated business units in several countries. At this level, the
company makes a greater effort to address the local needs of operations in
each country. The fourth level of globalization is a truly global company.
This type of business views the world as a single market, develops an
overall strategy for its various operations around the world, and applies
the lessons of each country to ensure its global success. Derryberry noted
that this is the ideal level for a globalizing organization, but that it
is not easy to achieve.